Manufacturing ramped up in May, improving from strong results the month before, the Institute for Supply Management said today.
The Tempe, Ariz.-based group’s manufacturing index, known as the PMI, improved to 61.2 percent last month, up from 60.7 percent in April. The gain was fueled by an increase in new orders.
If anything, the index was held back by manufacturers not being able to keep up with new orders and having trouble hiring enough workers.
“We are now fighting through an obstacle course,” Timothy R. Fiore, chair of ISM’s Manufacturing Business Survey Committee, said on a conference call. “It is a great challenge to have.”
The index is based on a survey of executives in 18 industries. A PMI above 50 percent indicates economic expansion in manufacturing.
In May, 16 of the 18 industries reported economic growth. They included furniture, primary metals, fabricated metal products, machinery, miscellaneous manufacturing, and transportation equipment. Only one industry, printing, reported economic contraction.
“This is another fantastic report, no doubt about it,” Fiore said.
The PMI has averaged 58.4 percent the past 12 months. The index has not dipped below 50 percent during that period.
Today’s report demonstrates how manufacturing has bounced back from the COVID-19 pandemic. In April 2020, the PMI plunged as factories shut down because of COVID. A recovery commenced as plants implemented new safety procedures. By June 2020, manufacturing expansion had resumed.
ISM’s New Orders Index rose to 67 percent in May, up from 64.3 percent the month before. The institute said 16 of 18 industries reported a gain in new orders. An increase in new orders shows up later as a rise in output.
The group’s Production Index cooled to 58.5 percent last month, down from 62.5 percent in April. ISM said 13 industries reported an increase in orders, with two reporting a decrease.
“All indications are that production can not meet demand,” Fiore said.
The institute’s Employment Index declined to 50.9 percent in May from 55.1 percent in April. The group said nine industries reported employment gains while three reported job decreases.
The PMI is considered a leading economic indicator and is a barometer of where manufacturing is heading.